Individuals who require long-term care are generally not sick in the traditional sense, but instead, are unable to perform the basicactivities of daily living(ADLs) such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair), and walking.

Age is not a determining factor in needing long-term care. About 60 percent of individuals over age 65 will require at least some type of long-term care services during their lifetime.About 40% of those receiving long-term care today are between 18 and 64. Once a change of health occurs long-term care insurance may not be available.

Many individuals may feel uncomfortable relying on their children or family members for support, and find that long-term care insurance could help coverout-of-pocket expenses. Without long-term care insurance, the cost of providing these services may quickly deplete the savings of the individual and/or their family.

Premiums paid on a long-term care insurance product may be eligible for an incometax deduction. The amount of the deduction depends on the age of the covered person.Benefits paid from a long-term care contract are generally excluded from income.

Types of policies

Private long-term care (LTC) insurance is growing in popularity here in the United States. Premiums, however, have raised dramatically in recent years even for existing policy holders. Coverage costs can be expensive, especially when consumers wait until retirement age to purchase LTC coverage.

As they relate to U.S. income tax, two types of long term care policies offered are:

Tax qualified (TQ) policies are the most common policies offered. A TQ policy requires that a person 1) be expected to require care for at least 90 days, and be unable to perform 2 or moreactivities of daily living(eating, dressing, bathing, transferring, toileting,continence) without substantial assistance (hands on or standby); or 2) for at least 90 days, need substantial assistance due to a severecognitive impairment. In either case a doctor must provide a plan of care. Benefits from a TQ policy are non-taxable.

Non-tax qualified (NTQ) was formerly called traditional long term care insurance. It often includes a "trigger" called a "medical necessity" trigger. This means that the patient's own doctor, or that doctor in conjunction with someone from the insurance company, can state that the patient needs care for any medical reason and the policy will pay. NTQ policies include walking as anactivity of daily livingand usually only require the inability to perform 1 or moreactivity of daily living. The Treasury Department has not clarified the status of benefits received under a non-qualified long-term care insurance plan. Therefore, the taxability of these benefits is open to further interpretation. This means that it is possible that individuals who receive benefits under a non-qualified long-term care insurance policy risk facing a large tax bill for these benefits.